At the heart of the current U. S. mortgage crisis are a variety of players that include circa 2006 home buyers with houses they couldn’t really afford, mortgage brokers who sold mortgages to people they knew couldn’t afford them, banks who turned those mortgages into securities that were bound to (in some cases designed to) fail, all held together with bureaucratic glue made almost entirely of testosterone and bullshit, and decorated with robo-signers and lost documents by the millions. Old news, right? But who would have thought we’d see many of the same behaviors emerge around one crappy refrigerator from Home Depot?

My friend Ralph owns that crappy fridge, an LG model based on a Whirlpool design that was built for only one year it was so bad. Ralph, who didn’t know any of this at the time, bought the Fridge at Home Depot and bought the extended warranty there, too. Since then he’s had seven service calls to replace all the circuit boards, the compressor (twice), the ice maker (three times), and to replace various plastic parts that had literally fallen off. One failure spoiled all the food in the fridge which (GE?) paid to replace. One ice maker failure was so bad it flooded Ralph’s house. The ice maker especially is so bad on these fridges that there are no longer any replacement parts available to be ordered. None.

Now if you have bought any larger ticket item at Home Depot you know they have a three strikes and you are out policy very similar to certain state lemon laws. For all I know it may even be a state or federal regulation that prompts Home Depot to replace the entire unit if any part breaks three times.

Ralph, with his third ice maker lying dead in the bottom drawer freezer of his old LG, is due a new refrigerator-freezer.

But so far he can’t get one.

Here’s the problem. Like most big box retailers, Home Depot doesn’t really offer its own extended warranties. They resell warranties from a third party, which in the case of Ralph’s fridge came from General Electric.

So it is GE, not Home Depot or LG, that should pop for Ralph’s new fridge. Except GE sold the warranty along with a lot of others to another company called Assurant Solutions, which now handles extended warranty repairs for Home Depot.

This is analogous to your mortgage being bundled with a bunch of other mortgages and sold to a different bank. Assurant Solutions is like that mortgage servicer you love to hate.

Assurant Solutions assured Ralph that he indeed would qualify for a new fridge if his ice maker had, in fact, failed three times, but they had no reason to believe that was the case, BECAUSE THEY RECEIVED NO SERVICE RECORDS AT ALL WHEN THEY BOUGHT HIS WARRANTY FROM GE.

Ralph has receipts, he has photos of bad parts, he even has the complete second-to-last ice maker as a memento from the repairman who by now has his own coffee mug at Ralph’s house. Ralph has plenty of documentation to prove that his fridge is a dud and he is therefore owed a new one. But since Assurant Solutions has no repair records, they say they can’t help him, so he has to go back to Home Depot.

And that’s exactly what Ralph did. Calling Home Depot he learned that store managers have super powers they can invoke in cases like this. So Ralph took his receipts and his pictures and his busted ice maker to the very Home Depot where he bought the fridge and confronted the store manager, who was very sympathetic. The manager took his own pictures, asked questions, filled out a form, and submitted it to Home Depot HQ as proof that Ralph’s beef was legit.

And Home Depot, accepting all this on the word of its store manager, sent all the paperwork along to Assurant Solutions, which promptly denied the claim BECAUSE THEY RECEIVED NO SERVICE RECORDS AT ALL WHEN THEY BOUGHT HIS WARRANTY FROM GE.

Are we seeing a trend here? Ralph is being victimized. After all, he paid for that extended warranty. It’s easy to see Assurant Solutions as the bad guy, but why didn’t GE hand over those service records? Why didn’t Assurant Solutions demand them a part of its due diligence? Because Ralph’s LG fridge is the food storage equivalent of a sub-prime mortgage might be the answer to this question. Neither GE nor Assurant Solutions probably wanted to even think about Ralph in the midst of their deal-lust.

Ralph can go to court, of course, and probably will. But short of Home Depot doing the right thing or GE fixing its error and Assurant Solutions then fulfilling its obligation, I’m expecting to enter shortly, stage left, the robo signers! They might claim Ralph’s LG refrigerator doesn’t even exist.

Update — It took about an hour but Ralph now has a $2400 credit from Home Depot for a new refrigerator of his choice.

refrigerator cop, you obviously have not read Cringe for the past 20+ years. Anderson Cooper could learn a few things.

the upshot is this: “SHELL GAME! step right up, ten dollars right there in the corner, my man, this is really simple, as I move the shells around, like this, pick the one that has the pea, right here, see the pea? — pick the pea. you will win all the money on the table. put it down now, watch the shells closely, make your pick. Step right up… .”

everybody is taking, nobody is giving. this should sound really familiar. down around the courthouse when I was a reporter, this was called fraud by omission from GE, damaging Assurant and the retail customer, and fraud by commission by Assurant, damaging the retail customer.

and this is why extended warranties are a shell game. unless the seller is the servicer is the manufacturer, there are LOTS of places to fall through the cracks.

I’ve done this twice. once for a new Ford from Ford, no claims. once for a Kenmore fridge from Sears, so far four claims.

if there is a third party of any sort, I pass.

and I don’t buy high-end stuff. more things to go wrong faster, and more costly, and midline works just fine. costs $250 just to roll a truck on appliance repair these days, I’m told.

another reason to do your own repairs after warranty.

Hank
April 7, 2011 at 2:15 pm

I’m not understanding one aspect of this. Presumably the money Ralph paid for the extended warranty went to GE. GE, in turn, sells the warranty to Assurant Solutions. How does Assurant Solutions make money out of this? And is GE coming out on top by getting money from both the customer and Assurant?

Dave
April 7, 2011 at 4:40 pm

In my imagination (since I really don’t know any facts) a warranty company isn’t just a Ponzi scheme that has to keep selling warranties in order to make payouts. Most of the money you pay for the warranty is held somewhere, making interest, with the theory that all that warranty money and its interest will pay for the subset that have claims, with some left over. So the warranty liabilities are balanced by a large pool of cash somewhere.

That being the case, I would imagine that GE transferred the money to Assurant along with the warranty liabilities. (If not, then GE is very smart and Assurant is very foolish.)

David L.
April 7, 2011 at 10:15 pm

Assurant wouldn’t have bought the warranty from GE, rather GE would have paid Assurant to assume responsibility for it. And GE would profit by paying less to Assurant than HD paid to GE. Pretty pathetic all around.

Andrew Robinson
April 8, 2011 at 12:02 pm

Sounds like the kind of derivatives deal that did lead to the mortgage meltdown.

An interesting story and Bob being Bob he’ll be ahead of the curve on this one! You read it here first. I still can’t believe all the banks in the UK buying all the screwed up debt that was re-packed from the US banks. Worst was RBS, who bought a dud bank. And over paid for it too!

Now I’ve got my money with RBS, it’s in effect an interest free loan I give them, and they have the dirty cheek to charge me! I’d get a better return stuffing my mattress with cash…

David Stewart
April 7, 2011 at 11:38 pm

I wish I had enough cash to stuff my mattress!

Dan
April 7, 2011 at 3:10 pm

OK, Bob – you’ve now shown the same problem with mortgages and refrigerators. Presumably cars have it too, and maybe a few toasters out there.

How far does this go, servicing rights being transferred with no paperwork, and nobody intending to actually deal with the reality of customers? College degrees? Birth certificates? What about the servicing of the indulgences I paid for – to whom did Saint Peter forget to give my paperwork?

(Yet Another) John
April 8, 2011 at 10:55 am

College degrees? ‘Fraid so.

I have three degrees, and in only one case can I get my transcripts from the College. For the other two I have to order from a company that services these requests. Bloomsburg University (a small state university in PA) still keeps things in-house; Temple (of Bill Cosby fame) & Capella — both large universities — do not.

Last year I received a letter from the originator of my student loan (circa 1975, and long paid off) telling me they’d been hacked and my SSN, birthday and name were stolen (along with a few bagillion others). Why the **$!* were they still sitting on that data? Arrrgh.

Mike C
April 7, 2011 at 3:20 pm

Well kudos to Home Depot for taking care of it instead of passing the buck as they legally could have. As for GE and Assurant, they need some more bad press. These wheeler-dealer types need to have some skin built into the games they play.

swschrad
April 8, 2011 at 6:18 pm

I have had some issues with Home Depot and Menards stuff in the past. keep calm, show the receipts, present the bum product, make your explaination. they have always taken care of me. Sears has taken care of me. GM and Ford have taken care of me, with the exception of the badly designed oil pan gasket in the 1990 Ranger which sheds, sludges up the oil pickup strainer and cuts oil flow to the engine… and to fix requires a new oil pan at $560 as well as a partial pull of the engine. assuming it didn’t wreck the engine.

just in case anybody has any ideas about that used 90 Ranger on the lot for $500. they fixed the issue a couple years later.

Mark H
April 12, 2011 at 11:21 am

Note that Home Depot only stepped up after this very well read blog was posted. Had this been some sideline blog with a handful of readers it would have been ignored. Another example of what happens when all you can compete on is price. With ever lowering margins you have to continually cut overhead, reduce customer service, outsource non-core functions, and cut whatever you can.

DaveN
April 7, 2011 at 3:20 pm

Unlike the other posters, my comment is “mission accomplished.” Of course I’m late to the game and the others probably didn’t see your update.

Too bad things have to work this way, but it’s good that your friend got the appropriate result.

I am laughing at the above complainers, wanting to know why Bob is doing his Consumerist impersonation.

It’s clear that Bob has another venture in mind, which would apply a tech/communication solution to prevent these lapses in assigned liability.

(…or maybe that’s the solution teed up by one of the companies from the Startup Tour…)

Dustin
April 7, 2011 at 3:40 pm

Kudos again to Home Depot for supporting their customer. Ultimately, Home Depot is the real responsible party in this, they sold the customer the cruddy warranty and made money on it. They should make good on it. I’m glad they recognized this! Hopefully Home Depot will get enough trouble from extended warranty issues like this that they will drop GE as the warranty vendor.

Gstritch
April 9, 2011 at 6:33 am

You missed the point. Home Depot did NOT step up to the plate when presented with all the facts – they evaded their responsibility until this columnist put the spotlight on them. They had no intention of honoring the responsibility until it became a PR problem of their own.
The underlying question of this whole story is ‘Has blatant fraud deliberately enabled through bureaucracy become acceptable business practice?’ – and the answer seems to be YES

Well done Bob! Bravo! It’s fantastic that you can help make some justice appear in the world! I wish there were more cases like this! Keep up the good work.

Ronc
April 8, 2011 at 2:42 pm

It sounds like you inferred from the update that this column influenced the outcome.

Mr Windows
April 7, 2011 at 5:45 pm

Friends don’t let friends buy crappy Korean refrigerators. Or Chinese. Ir, if you can help it, Mexican-made US brands. Whirlpool is moving their Mexican production back to the US after a less-than-stellar experience.
I bought my Maytag 4-door French Door from a local retailer, Spencer’s TV and Appliance, who matched the online price I got from homedepot.com. I also did something I rarely do – bought the extended service plan, which goes through Spencer’s, not some 1-800-CallCenter in Mumbai. I’ve even already used it; I noticed a paint defect on the top corner of one of the doors and asked it be replaced, and it was, the entire door. I was looking hard at the Samsung, but it just didn’t feel right. O did quite a lot of research on the customer reviews LG, Samsung and others were getting. Both of the two Korean companies were getting mixed reviews, with a lot of negative comments about ice makers. LG also makes Kenmore now, although I understand that Sears is going back to Whirlpool.
Extended warranties and service plans have always been a racket in electronics and appliances. It doesn’t surprise me that the ‘sub-prime’ shenanigans are happening here, too. Remember that a lot of credit cards already have extended warranties on many purchases, some with a lot of limitations, but don’t forget to shop around your local retailers who have their own service departments. Relationships are worth something, and even though the major retailers may come through as in this case, they don’t always have the authority or the desire to keep one satisfied customer.

Tim Kane
April 8, 2011 at 8:54 am

I find it odd that the Koreans have carved out any slice of the appliance business.

I lived in Korea for the better part of four years. Know one I knew so much as owned a drier. In fact, this very fact has had a huge impact on the Korean landscape – because Korea has 50 million people living in an area the size of Indiana, the entire landscape is covered in block housing high rises. Korea probably has the greatest % of people in the world who live above the 7th floor. And ALL those buildings are designed with balcony insets that allow Koreans to hang dry their laundry.

I’m told that rich people have driers, but, I never saw one.

I’m sure all of this is the result of government policy. Industrial policy used to create an export industry of appliances that Koreans don’t even use (they of course have washers and refrigerators, and something that we don’t have – kimchi fridges). Government policy to refrain from using dryers because they consume energy that Korea would have to import.

Similar situation with using clotheslines instead of dryers in Japan, although the high-rise living is not as prevalent there as in Korea. It was certainly a shock to me when visiting such a technologically advanced, convenience-oriented country to learn that most people had neither dryers nor garbage disposals.

Interesting — didn’t know about the kimchi refrigerators — thanks for that tidbit. I’m always dismayed at having to throw out my leftovers from Korean restaurants so I don’t stink up my whole fridge. Would certainly be handy to have a dedicated fridge for that stuff (though I suppose since I don’t need to ferment my own kimchi, a standard mini-fridge would probably be a cheaper solution).

Eadwacer
April 7, 2011 at 5:57 pm

And kudos to Bob’s friend, who had the foresight to keep all those records and take all the pictures to back up his claim. Me, I have trouble finding the receipt for stuff I bought yesterday.

Bill
April 7, 2011 at 6:36 pm

Go Ralph! Congrats!

Happy Heyoka
April 7, 2011 at 7:31 pm

For me the worrying thing about this story is that it illustrates how the actual production engineering of consumer goods is being decoupled from consumer feedback.

It would be easy to imagine a scenario where a company like ‘Assurant’ deals with all of the paperwork (…) and sources the repair folk and parts etc. And that the only time that a company like “LG” ever hears from them is to get an annual cheque… that the guy who designed the refrigerator to use that ice maker never actually gets to hear (or worry or maybe even care) about how stinky it is in the field.

I’m sure language and cultural issues are a problem but you can’t just blame the Koreans, Chinese or Mexicans for this : I know that they are capable of building high quality goods – but if we ask for cheap crap they’re happy to deliver.

The problem in this story is that it appears GE (and whomever ‘owns’ the LG mark in USA) have disconnected themselves from the manufacturing quality and consumer feedback process in such a way as to break all the safeguards.

So good one, Ralph, for bringing this to their attention.

Tim w
April 8, 2011 at 9:59 am

I think this is a key to many of our current product problems.

Cris E
April 13, 2011 at 6:49 am

I think LG knew exactly what size dog they had on their hands: that refrigerator was only sold for one year.

And I think the sale of support contracts to Assurant without records was probably done intentionally. The data was certainly offered, but Assurant probably looked at the cost of importing that data into their systems and the resulting advancement of most customers’ pay-off clocks and decided to save the money for later. It’s a terribly cynical move even for people who bank on consumers not being able to find receipts three years down the road. (To be clear, I don’t know the facts behind any of this, but I’ve transferred programs from one vendor to another and handing over the historical data *had* to be discussed. Accounting types had to have either seen it or explicitly not wanted to see it to price the sale and estimate the costs of the program going forward. Assurant has IT systems built out to handle the new work, so both IT and call center managers had to have given passing thought to the data GE accumulated over the previous years. No chance this was an oversight.)

John in Texas
April 7, 2011 at 7:45 pm

It’s only a matter of time before GE buys Assurant Solutions and causes an infinite loop of lost customer information. Or else Assurant Solutions gets gobbled up in a leveraged buyout with the investors sucking all the cash out, leaving a shell that ultimately goes bankrupt. At least, I think those are the usual options these days.

John Demint
April 7, 2011 at 7:53 pm

According to the NY Times, GE does not have to pay any Federal taxes for 2010 and will get a refund.

I would say they have already mastered the infinite tax loop.

Doug G.
April 8, 2011 at 12:14 am

Regarding the payment after Bob blogged this: who blinked, Home Depot, or Assurant? Since his credit is with HD, then it sounds like they’re just eating the loss to make the bad news go away, and that Assurant is getting away with it just like they wanted to.

It has long annoyed me that companies are allowed to transfer responsibility like this. What’s the point of finding a loan organization one trusts if one’s loan will be sold to some other, likely less reliable outfit at the first opportunity? I realize that the ability to transfer loans (and service contracts, etc.) allows a greater volume of lending, and hence, more people are able to participate in home ownership. But surely the person who purchased the loan, as a primary party in the arrangement, should have some voice in the ability to execute such a transaction. Perhaps if the loan carriers had to get the permission of the lendee, they’d then have to make it worth the lendee’s while, and demonstrate that the buyer of the loan was trustworthy and acceptable to the lendee.

Tim w
April 8, 2011 at 9:58 am

The problem is that the company that sells the motggage or warranty is absolved from all future liability. Perhaps if they retained some liability for the performance in the future –

Jim
April 8, 2011 at 1:12 am

Interesting read. But I would say that you should count yourselves lucky in the USA – I lived there for a few years. Here in South Africa we are in a much worse situation and I sure this applies to most 2nd / 3rd world countries. We get all the products that are duds elsewhere in the 1st world. We are literally a market where they dump all the shoddy appliances etc. and us as South Africans think we getting a “really” good deal. So I’m sure we have the rest of those dud Whirlpool fridges Ralph owns being sold here. But all is not despair as the government is in the process of promulgating a “Consumer Protection” bill which will hold the suppliers accountable – so we’ll have to wait and see.

Mark
April 8, 2011 at 3:41 am

I had a similar experience with an LG ‘fridge from Best Buy. Because I was not familiar with the brand at the time, I bought the extended warranty.

It was a piece of junk and we had to have it repaired numerous times. The ice maker was replaced 4 or 5 times. Mainboard replaced once. Front panel – once. The ice chute fell off in the first 6 weeks.

After fighting with the Geek Squad and BB customer service, I wrote a letter to the CEO of Best Buy. That finally did the trick and we got a new fridge of our choice.

By the way, the LG brand used to be known as Lucky Goldstar – for those of you who remember the low end Goldstar brand of electronics.

The big box stores push the Korean brands – I suspect that they make a lot more money on them.

Yikes — didn’t know that LG and GoldStar were the same company. Thanks for that.

Subscribing to Consumer Reports’ website is a pretty cheap way to get access to reliability data before doing a major appliance purchase. Just checked and their refrigerator report indeed shows LG to be at the bottom of the heap (along with GE) when it comes to reliability, only putting in a decent performance in the category of bottom-freezers with no icemakers.

swschrad
April 8, 2011 at 6:24 pm

if anybody remembers Lucky or GoldStar computers… ugh. they also bought Zenith and Go Video.

you can subscribe online to Consumer Reports for five bucks a month, no minimum, no nonsense about not cancelling you when you ask for it. so essentially for 5 bucks, two months’ issues on the news stand, you can get any review you want of products you’re looking at.

they’re not perfect, either, but they catch the real stinkers as soon as they hit the market and get reviewed, and the year-over-year ratings of brand quality come from readers. and are pretty accurate IMPHO.

no disclosures needed.

SimonSays
April 8, 2011 at 5:03 am

The sausage mill of consumerism. Who hasn’t been there. Often the question is are you up for the battle and repetition on every level/front. If there is illness or other problem in the family then often one might be inclined to surrender. Even with a victory the time cost and effort are greater than the object. For LG owner if you take what he makes per hour and then add all the time spent only to have what he paid for he may well have won and lost a phyric or “fridgic” vicotry.

As well tied to the mortgage/lending/borrower fiasco – this kind of stink permates throughout the US.

As the owner of an LG refrigerator (about a year old), I would love to know which model this was.

Joe Dokes
April 8, 2011 at 6:41 am

My question is did Home Depot replace the fridge before or AFTER Bob posted the article? Does it take bad publicity for a company to do right? Now in reality, I’ve had almost totally good experiences with HD.

Regards,

Joe Dokes

Sam Yewell
April 8, 2011 at 7:14 am

Bob, if I sent you some emails about my broken stuff, would you mind putting out some negative publicity so I can get them replaced for free too? I could use some new gear from Apple and Onkyo…

Roupert Pipkin
April 8, 2011 at 8:19 am

Getting all foil-hatty here, but why do I think that Assurant not getting the service records from GE is a feature, not a bug?

swschrad
April 8, 2011 at 6:26 pm

don’t ask

don’t tell

and if you don’t work here, you can go to Hell.

very common business model.

Dr. Mike
April 8, 2011 at 8:55 am

Start podcasting these sir. Maybe they’re in the works, but do it as soon as you blog. I value your insight, but with all my information overload I tend to read less and less and love hearing things so I can multitask while driving and so forth. And you need to get a gig on TWIT. You’re so right for that and it’s takin’ off. Respectful regards to you and your family most brilliant sir and keepin’ comin’.

Ronc
April 8, 2011 at 3:16 pm

I listen to many of Leo’s podcasts. He recently had to change the format of the 10 minute daily gizwiz podcast to an hour long weekly daily gizwiz because they were too short and frequent to please the advertisers. Bob’s columns are only 3 to 10 minutes long and would be even more of a problem. OTOH, if Bob read and responded to comments as well, that would extend it to an hour but that may be too much for every day.

mark london
April 8, 2011 at 9:04 am

I wonder when someone will actually make NOT selling on your loan/warranty to a third party part of their POD to the consumer?

Bob is quite right to bring this up – what’s actually at stake here is data – your data, the data relating to that product, HD sales data etc. All that data (although not passed on in this case through incompetence not design) is sold without your knowledge to a third party company you have no awareness of or relationship with.
What’s it going to take to break this? If a trillion dollar issue with the biggest loans 99% of middle-class humanity is ever likely to have wouldn’t make people think about that poorly written rights waiver they’re signing at the checkout, or voting in politicians to craft better consumer laws, then what will?

It should be illegal (or at least very difficult) for any company to onsell an ongoing business relationship with you without your permission or receipt of notification. This would include any form of loan/warranty/guarantee/credit that has not expired at the date of the sale.
Now the argument is that any such law would kill a lot of mergers and acquisitions. No, it would just slow them down a bit, and grow an entire new business in ‘getting permissions’. Business (especially banks) would complain like hell, but what are they going to do? Stop selling us stuff? Too big to fail has a corollary: too huge to not need every customer they can get.

This isn’t science fiction, or socialism. This is just consumer power. We have that power. Through laziness or stupidity we choose not to exercise it.

Tim w
April 8, 2011 at 10:01 am

Residual liability could give the same benefit and be easier to implement. Not that companies wouldn’t complain.

The banks must have comitted perjury with these forged documents. The grunt work was farmed out to a company with a price list that includes: “Create Missing Intervening Assignment,” “Cure Defective Assignment,”;”Recreate Entire Collateral File,”

In St. Louis this week there was an auction of the household possessions of the former executives of US Fidelis. Day One of the auction featured 12 cars and trucks, two motorcycles, half a dozen ATVs, 8 go-carts and countless other items once belonging to Corey and Darain Atkinson, former owners of the bankrupt auto warranty sales firm.

You can try to sell off or avoid your financial obligations, but eventually it will catch up with you. It won’t be pretty.

There was a time when extended warranties were not needed. My first refrigerator came with a 1 year parts and labor, and a 5 year parts warranty. I bought it 27 years ago and it is still running. The same type of unit from the same maker today comes with a “limited” 1 year warranty. I am not sure I am happy with the fact expensive major appliances are not being built as well as they used to be.

That’s because they’re being built as “smart”/electronic devices, with much less attention to the mechanical engineering of the devices. The electronics support eye-candy, while ME supports physical performance. A compressor can be engineered to last, for all intents and purposes, forever; or 13 months. I leave it to the reader as an exercise what corporations have been doing the last few decades (since the Right Wing handed them control). It’s cheaper to add the eye-candy than it is to build robust mechanicals. Hehe.

Lord Mungo
April 8, 2011 at 2:52 pm

Yup. My parents bought a Sears Coldspot refrigerator in 1962….the kind you have to manually defrost from time to time. Decades ago that frig went into the basement as a spare. Since then it has outlasted 2 “modern” refrigerators and it looks like the 3rd replacement is about to go Tango Uniform anyday. That 1962 Sears frig has operated continuously for 49 years! This is even more astonishing when you consider that 1962 was the first year that IC’s were used in a big way to replace individual transistors in computers. In 1962 John Glenn was the first American to be blasted into orbit on top of a Mercury rocket. With all the super duper high tech we have now, we can’t seem to build a frig that lasts more than a few years.

Like my father says, “The don’t make ’em like they use to. Now get off my lawn!”

Ronc
April 8, 2011 at 3:34 pm

Quite true that durable goods are much less durable thanks to all the electronics. Some of it doesn’t add eye candy, just “feature” check points like “more energy efficient”. But this has nothing to do with politics or legislation. I has to do with less interest on the part of the buying public with the technology behind the products. People are willing to pay for enumerated “features” but not for the reliability that comes from simplicity.

Rupert Pupnick
April 11, 2011 at 5:45 am

I’m reminded of the Toyota accelerator issue of a few months back.

Whatever the outcome, you can’t convince me that an electronic interface between a gas pedal and a throttle controller in a car is more reliable than a simple mechanical linkage. But it probably is cheaper.

swschrad
April 8, 2011 at 6:31 pm

fact: compressors used to be made in the US. now they’re all out of China.

fact: compressors used to have copper pressure components. now aluminum.

fact: compressors used to run low and slow with big moving parts so internal stresses were less and the oil bath lubed and cooled well. now they’re dinky little things that run at double the old speed for lower overall electric usage, and wouldn’t you know, all those little parts and tight tolerances and higher speeds burn ’em up faster.

fact: copper coils no more, all aluminum.

fact: anything that can be made of plastic is. used to be chromed steel.

any wonder that there are no more 1/5/10 warranties to start with?

Ronc
April 9, 2011 at 2:10 pm

I live by the ocean, so I have one little quibble with the “chromed steel” comment. Plastic, so long as it’s not subject to UV damage, is much better than any kind of steel that sticks to a magnet, whether painted, galvaized, or chrome. The only kind of steel that survives outdoors by the ocean is non-magnetic stainless. Hard-anodized aluminum is also ok but unless you insist and pay for it custom, you won’t even be offered the chance to get either of the two good metals.

Ronc
April 9, 2011 at 2:12 pm

I hate galvanized so much I can’t even spell it correctly.

larry
April 8, 2011 at 12:08 pm

I did work for GE Consumer Service. Product Warranty’s are known as extra dealer profit. Very few products make any sense to have a warranty for.

Harold
April 8, 2011 at 2:56 pm

Please elaborate on the update–it took an hour of what??

Was it an hour after you posted this blog?
Was it an hour of Cringely at Home Depot? –or
was it an hour in Purgatory at 37 degrees for Assurant Services?

swschrad
April 8, 2011 at 6:37 pm

I would venture a guess of 1 hour of the store manager at HD faxing the customer documentation to a regional office, and palavering with them, to get a credit of that size.

I would also venture ASSurant is not going to lose their contract over it. “oh, well, geez, what can I say, we just didn’t get any supporting evidence in our purchase of the liabilities of GE Extended Warranty’s portfolio.”

GE has a long, long way to climb to get quality in its appliances again, too. a year ago, they tried to sell the division, and failed. so they have supposedly committed to improve the quality and reliability again. they’ve engineered their appliances down to skin and tissue paper over 10-20 years.

for that matter, Maytag has seriously deteriorated in estimated life in the years before they sold out to Whirlpool.

Tim Toblerone
April 9, 2011 at 6:45 am

Bob, stick to triumph of the nerds. Write about Steve Jobs, Apple, and the mobile device revolution or any other stories you may have from your time with Jobs that may have revealed these unfolding plans.

Thanks man,

Tim

Ronc
April 9, 2011 at 2:17 pm

Someone’s been drinking the kool-aid.

Gstritch
April 9, 2011 at 6:53 am

Why isn’t there an attorney general in this country asking Assurant how they expect to honor contractual obligations with none of the information necessary to fulfill this legal requirement. This is the corporate version of ‘the dog ate my homework’, therefore we have no responsibility…. Maybe I’ll contact Ford and GM with my offer to take over all their product liability, but they needn’t transfer any of the data because I have no intention of honoring the contract. Transfer the money offshore, BK the company, and live the good life – because the justice department will never prosecute blatant fraud(its been working for Wall Street, why not me?)

Lord Mungo
April 9, 2011 at 9:56 am

Exactly, it IS outright fraud.

A warranty is insurance. Like all insurance, an actuary will analyze a set of statistics and calculate the relevant risks and premiums. If the actuary receives a good set of statistics, MTBF being one of the stats looked at for warranties, and does his analysis correctly, the premium charge…built into the product price…will cover warranty costs and produce a profit for the biz that collected the warranty premium, while holding the per unit warranty cost to a minimum.

When the holder of warranty liability transfers that liability to another party, it pays the other party to assume the liability. There is nothing wrong with transferring warranty liability in itself. The original holder of the warranty liability may have legitimate reasons for getting out of the warranty business. The biz that takes on the liability may be more efficient at providing warranty service, so they will produce a legitimate profit from the money that was collected even though the original issuer of that warranty likely realized a profit by transferring the liability. Sounds like a win all the way around. The original holder of the warranty liability makes a profit, the biz that takes on the liability is more efficient so they make a profit, the customer gets his warranty service done in an efficient manner.

Anyway, that’s the theory. The reality is that this only really works with some type of regulation that is enforced. Today we have an anything goes business climate, that “self regulates” according to the Church of Any Rand and the high priests of Friedrich von Hayek and Ludwig von Mises. Third and forth party warranty providers take on liability not because they are more efficient, but because the are scammers who make their money by denying warranty service. Yeah, I know, the grifters will be driven out of the market place that “self regulates” and blah, blah, blah. Not a lot of consolation to a person who purchased a frig thinking that his warranty contract is worth the paper it’s printed on and now doesn’t have a frig, or money to buy a new one. Sure seems like he’s just been “self regulated” into using an ice chest.

BTW, If I could go back to being 17 years old, I’d become an actuary.

lee
April 18, 2011 at 12:19 pm

I was told by an actuarial student in college.

A: Why do computer programmers like to hang out with actuaries?

Q: It makes it seem like they have a personality.

Chris S
April 9, 2011 at 8:02 pm

Oh great – I should probably dump all my GE appliance extended warranties (I have 3) down the shredder. If I need them (fortunately my GE appliances are still working) I will document the heck out of the problem. And if I have problems with Assurant, I will sue. The nice thing about suing is that you can claim punitive damages as well as actual damages, and you can sue everybody – Home Depot, GE and Assurant – in one action. If punitive damages are awarded (no guarantees here, pardon the pun) they can be as large as 40X the actual damages and still be “reasonable.” Ralph might have made an extra 80 grand had he gone that route.

DocDoc
April 9, 2011 at 10:40 pm

Ralph’s mistake was in ever talking to anyone other than Home Depot from whom he bought his fridge. That’s a recipe for the run around. Example: when I bought my iPhone from an AT&T store (lots of them in my State), the iPhone wall charger did not work. I went back to the store, where they said they could not help, and that I had to deal with Apple. There is only one Apple Store in my State, and it’s a long way away. We went the rounds where I refused all their attempts to get me to talk to Apple on the phone or to get an appointment at the Apple Store. So, I escalated, called AT&T directly, and eventually got to the regional manager. Long story short, the AT&T store manager ended up delivering a $30 non-Apple wall charger to where I work at no charge to me. In my experience, almost all places will give in without a lawsuit if you’re patient enough and go up the chain of command. NOTE: mortgages are different because they are explicitly and legally designed for being sold off, potentially many times.

James
April 22, 2011 at 6:18 am

Apple controls the hardware fully. AT&T is only reselling it and providing the plan services. Same with Verizon. If you buy an Apple product and it’s under the initial warranty or AppleCare, then Apple will help you at no cost. If you are too far from an Apple store, you can ship it in and get service. My company bought a bunch of iPads (1st gen) from Verizon and one of them had a defective screen, broken out of box failure. I called Verizon and they told me to call Apple. Apple said all they could do was provide me a refurbished iPad. It was broken the moment it came out of the shrink wrapped box! Had we bought from Apple, they would have immediately swapped it no questions asked! I ended up going up the chain at Verizon (good to be a business with enterprise support) and they eventually shipped me a new one and I already had a Verizon return slip that came with the original broken one. Once it was returned, we were credited back. Verizon had zero warranty swap process in place! They did not count on out of box failures. They assumed Apple would deal with it. They had to bill me again and then credit me back after the defective unit was shipped back. That is just insane and extremely cost inefficient not to mention terrible customer service!

Lesson learned? If buying Apple buy directly from Apple or at least a better vendor than AT&T or Verizon! Had excellent support from Other World Computing (macsales.com) and MacMall / PC Mall / Sarcom (same Co.).

James
April 22, 2011 at 6:27 am

Had a similar situation with a brand new Lenovo Thinkpad X201. The screen was smashed inside the display, completely spider webbed. There was no sign of damage on the box or any indication it was dropped or hit with a forklift. We order these by the hundreds and they come on pallets. This was one out of a thousand that was defective. Had a heck of time getting someone to take responsibility. Worked with Lenovo reseller who wanted nothing to do with it. Finally, managed to get Lenovo to ship me a replacement and then they told me to just keep the bad one! That was strange… The display costs more than the whole laptop!

Apples support is superb! I have an aging iMac 20″ and the screen has a line straight across the panel about an inch from the top. It’s still on AppleCare for a few more months. I scheduled a Genius bar visit and dropped it off. The tech took one look at it when it booted and just shut it down. Told me they would order the parts and I should have it back in about 3-5 days. Handed me a support slip to present along with photo id when I pick it up after they call me when it’s ready. With an appointment, in and out in an hour. Zero frustration.

Calling AppleCare results in speaking with an American in the good ole’ USA. They listen to what you tell them and they don’t follow a call script! I’ve had to call and after presenting all the steps I’ve taken, they immediately agreed there was nothing else to do and they even scheduled a Genius appointment for the same day!

Try that with Dell, HP or any other. You’ll fight with a non-native english speaker on the other side of the planet for hours or days or weeks. Finally, you may receive an empty box and an RMA. Next it may take 4-6 weeks for your sick computer to be returned and it may still have problems! Not to mention, they wipe out your disk even if that had nothing to do with the problem.

Ken
April 10, 2011 at 5:21 am

US Capitalism at it’s best.

ken
April 10, 2011 at 1:13 pm

As the owner of a computer store, we sometimes get calls from 3rd party warranty companies to go to homes or businesses to perform warranty work on our area.

Assurant Solutions shipped a part to a homeowner whose flatscreen TV had died, then they called me from my yellow pages ad. We agreed on a price, and I went onsite and I changed out a PCB on a flat screen TV, leaving the TV in working condition. Assurant Solutions never paid me.

We now require pre-payment from these companies.

Steveorevo
April 10, 2011 at 6:27 pm

Hmmm. Had a very similar issue but in the computer technology sector.

My mistake was buying a Quasai Motto Tooshitty (Qosmio Toshiba) from a retail outlet here in the states. It sat in a clean room on a well ventilated glass desk. No dust, no contamination. Hardly moved. And yet in less then two years, two hard drives, two system board failures, a graphic chip failure, a power supply fire (isolated, thanks to the cold room), and coutless calls to the retailer, and the extended warranty handler (ServiceNET whom handles a crapload of extended warranties after the first year was up with HP, Toshiba, etc.) FINALLY got a replacement Qosmio… The well over three strikes lemon law had to be threatened. Result? The newer model Qosmio also overheated and broke.

The design flaw was obvious, poor bearings on the system/graphic card fans and recalled hard drives (though that doesn’t explain the external power supply fire). A quick web search revealed other nightmerish experiences with other Qosmio users. But the pass the buck game with ServiceNET, Siemens (the repairer), was the icing on the cake. It’s easy to claim ‘but that replacement system board you got replaced doesn’t match the serial number we have on file for the warranty’. Did Siemens, the authorized repairer sent by ServiceNET not update the records with ServiceNET? ServiceNET isn’t Toshiba or the retailer (neither of which cared after the initial warranty expired).

It’s hard to pin down whom to complain to. A bbb.org complaint to Toshiba USA, circumventing ServiceNET’s poor performance did yield another defective replacement machine, made from remanufactured parts, and labeled as such. 6 months turned off in a storage shed and I finally tossed it in the recycle bin.

The lesson learned? HP, SONY, Dell, Apple, anybody, or perhaps any other model but never a Toshiba Qosmio again. And if you hear the word ‘ServiceNET’, just walk away.

Todd
April 11, 2011 at 8:07 am

Never mind the warranties, sounds like being Bob’s friend gets a lot more traction. Say Bob, before I buy my next big-ticket item, can I buy you a beer?

A Different Scott
April 11, 2011 at 8:59 am

Hmm, Bob sees an ominous pattern in the business of bundling and selling contracts like mortgages and service aggreements (and helps his friend in the process). I wonder if he notices a similar ominous pattern in commodities / futures markets, like electricity, oil and gold?

Mark S
April 11, 2011 at 10:14 am

So I wasn’t the only one victimized by a piece of crap, shoddy, junky, biodegradable LG fridge!

Mine is much simpler model than the one you describe. No ice maker, no digital controls, nothing but a fridge compartment, a freezer compartment a compressor and a plug. You wouldn’t think there would be much to go wrong on such a simple device, right?

Wrong! The fridge alternately freezes our food solid or does a better defrosting job than the microwave, with no rhyme or reason or warning that it’s about to switch to being a different kind of appliance.

It’s flimsier than it looked in the store, too. The door handle literally came off in my hand one day. And just this past weekend, when we’d cleaned it after an extended power failure, it continued to leak liquid on the floor for several hours AFTER it had been emptied of all food contents. I still have no idea what the liquid was or where it was coming from. It couldn’t have been condensation, not for hours.

I bought it from Future Shop (a Canadian division of Best Buy) for about $400 Canadian, which should have set off warning bells right there. I didn’t spring for the extended warranty, and judging by your friend’s experience, that was probably a good thing. This thing has turned me off LG as a company, and you’d have to work very hard to convince me to buy any kind of product from them in the future.

Careful Shopper
April 11, 2011 at 1:46 pm

Scott Adams already addressed this kind of business practice: confusopoly. I got stung by Fry’s and LG a couple months ago on a rebate. Their logic was iron-clad and there was no way I was getting the $20 rebate from either Fry’s, LG or LG’s rebate processor. Each entity pointed the finger at the next to get my rebate. None will get a dime from me again, after just buying 3 LG major appliances in the last year (new house). A pox on all their houses!

Andy
April 11, 2011 at 4:45 pm

And I’ll bet the same $2400 that the credit was given to Ralph directly by Home Depot… no involvement from GE or Assurant in any way whatsoever.

I recently became aware of an alternative design philosophy that incentivizes a manufacturer to build for reliability, longevity and recyclability. I found this a fascinating and exciting approach, with the focus on selling the capability, not the device, and engineering the device to optimize function, not sale profitability.

I came a bit late to this party — the idea has been kicking around from about the turn of the millennium — and goes under the moniker of ‘Cradle to Cradle’ design, with a book by McDonough and Braungart (North Point Press, 2002) of that name laying forth its main tenants.

In a recent interview on the BBC a proponent put forth the example of a common appliance, the cloths washer. Imagine, she said, buying not the washer itself, but rather a lease on a device for a fixed but significant number of wash loads, say 10,000 washes. (10 loads a week for about 20 years ). Repairs are the responsibility of the manufacturer. At the end of the lease period the manufacturer reclaims the device and reuses the materials.

The manufacturer then can use valuable and durable materials such as copper and stainless steel — materials that are increasing in value over time — and actually carry the materials on their books as an appreciating asset. The manufacturer enjoys the security of an assured supply of these materials at a known cost and known time in the future. It has every incentive to build for durability, serviceability, and recyclability.

There are apparently European groups trying to bring this concept to fruition. Could it work here?

Trent
April 12, 2011 at 5:40 pm

Beat me, kick me, but don’t let the beer get warm.

Robert
April 24, 2011 at 5:02 pm

Well you should try and collect on a disability insurance policy when you get disabled. They get there premiums no matter what but they do not pay out from what I can tell.

Tobyw
April 25, 2011 at 3:34 am

Extended warranties are big profit centers for stores. The ones I’ve bought were bought from the store who then made a profit on them. Doesn’t he person who took your money have any responsibility for the policy they sold to you? Surely they do!

I hope I have as much luck. I have a KitchenAid (Whirlpool) top of the line french door frig. Purchased at Home Depot along with extended warranty. After 2 years, everytime I close the right door, the left door pops open slightly. Hard to notice and most people never look at the doors when they close a frig. After 5 service calls no one can fix it. Didn’t know until recently the warranty was with Assurant and not Home Depot. The brochure had HD’s name on it and I call HD to place a service request. Anyway, Assurant will not replace the frig calling it a manufacturer’s defect. Whirlpool will not replace it because they claim it is not a defect, although they did say if I purchased my extended warranty directly through them I would not be stuck in the middle. Easy to say when they are not on the hook. I have spent hours on the phone with HD and they are still promising some resolution but I have little confidence at this point. Worse yet, Home Depot just terminated their relationship with Assurant so they have no clout with them and when I called Whirlpool with Home Depot corporate on the line, Whirlpool just blew them off. This may end up in small claims. I will never buy another Whirlpool product. What does anyone know about Samsung?

Anyone can get onto and operate on the Internet. However if you don’t follow the rules the world can now ignore and cut you off. In time my email provider’s job will get a lot easier when they start accepting email from only known, trusted mail domains.

G.
November 30, 2011 at 12:27 pm

This is my fridge! i bought it at SEARS. I let the warranty lapse and renewed it. When I renewed it, Sears said they had a 3 strikes policy. Upon request of the contract, which I would have never otherwise seen, I noticed they had a 4 strikes policy. I was told many times I’d have my fridge replaced, but I found on the next call I made, that I’d never really talked to anyone as that conversation was not logged.
The contract also said it would not reimburse me for the year I had a mysterious illness, which was actually food poison. the fridge made a mystery clicking noise that of course the repairman could find nothing wrong with. When the part gave out and was replaced with the korean (LG) part it kept giving out and was finally replaced with a USA made part I’d realized during that ordeal the fridge (keep a thermometer in this fridge at all times) kept cutting out and then working again enough to give me food poisoning. Over a year! I’d even had my water tested trying to figure out what was making me so ill.
Sears warranties are not worth the paper they are printed on, and trying to get them to stick to their word is another issue also.
After this I boycott LG & Sears…I urge anyone reading this to do the same. The only way to affect these big companies is to decrease their sales. Its a shame we have to do this to force them to be reputable. Do not give them the chance to be their next victim…feeling screwed over really sucks!

thing.so for the sake of argument lets say you wanted to make money using amazon. amazon is huge, they sell everything and probably not something you will be able to create a site to cover all that is there, but you…